AOW, pension and tax in Malta: what remitting really means
Malta taxes non-domiciled residents only on what they transfer to Malta — but article 2(5) of the treaty also ties the Dutch exemption to that transfer. "Zero percent by not remitting" therefore doesn't exist: then the Netherlands keeps taxing. And the AOW and the ABP pension remain taxed in the Netherlands anyway.
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If you live in Malta, Malta taxes your company pension only to the extent that you transfer it to Malta. The part you leave in the Netherlands, the Netherlands simply keeps taxing.
Three things to know up front:
- Malta has the reputation of a tax haven, and there is a kernel of truth in it. Whoever lives there but is not domiciled there (Malta is then not legally their permanent home country) pays tax only on foreign income that is received in Malta.
- But for Dutch citizens the 1977 treaty contains a provision that most brochures skip. That provision fundamentally changes the sum.
- The Netherlands may tax your AOW in any case, and a government pension too, unless you are both a resident and a national of Malta.
The remittance basis: what Malta itself does
As a Dutch citizen moving to Malta you become a tax resident there, but usually not domiciled. The Income Tax Act, the Maltese income tax law, then says in article 4: on income arising outside Malta, the tax is payable on the amount received in Malta. That is called the remittance basis: tax on what you transfer (remit) to Malta.
Foreign capital gains remain untaxed even on transfer. There is, however, under article 56(27) a minimum tax of € 5,000 a year. It applies to anyone with at least € 35,000 of foreign income that does not come to Malta, or not in full.
The provision that changes everything: article 2(5)
The reasoning "I leave my pension in the Netherlands, Malta doesn't tax it, so I pay zero" founders on article 2, paragraph 5 of the treaty. That article is about income that Malta taxes only "to the extent that such income is remitted to or received in that other State". Where the Netherlands must grant relief on it under the treaty, that relief applies only to so much of the income as is remitted to or received in the other State.
In concrete terms: your company pension is under article 19(1) "taxable only" in the state of residence, Malta. But if you don't remit it, it is untaxed in Malta. Then the Dutch exemption lapses for that part, and the Netherlands simply keeps taxing.
The Belastingdienst assesses an application for the wage tax exemption certificate on the basis of the treaty with your country of residence. It asks for proof that you are a tax resident of Malta. Either Maltese tax on what you transfer, or Dutch tax on what you leave behind.
What stays Dutch anyway
Your AOW (the Dutch state pension) falls under article 19(3): payments under a social security system may be taxed by the paying country, and the Netherlands does so.
A pension from government service, such as ABP years as a civil servant, teacher, police officer or soldier, the Netherlands may tax under article 20(2). It goes exclusively to Malta only if you are both a resident and a national there.
Lump-sum surrenders, where a pension is paid out in one go, the Netherlands may likewise tax under article 19(2).
| Income | Treaty article | Who taxes |
|---|---|---|
| Company pension, annuity (remitted to Malta) | 19(1) | Malta only |
| Company pension, annuity (not remitted) | 19(1) + 2(5) | the Netherlands keeps taxing |
| Lump sum | 19(2) | the Netherlands may tax |
| AOW | 19(3) | the Netherlands may tax |
| Government pension (ABP) | 20(2) | the Netherlands, unless resident and national of Malta |
What do I pay in Malta on what I remit?
What you do transfer, Malta taxes at the brackets of article 56 of the Income Tax Act; the top rate of 35% starts at € 60,000.
| Chargeable income | Single | Married (joint) |
|---|---|---|
| first band, 0% | up to € 12,000 | up to € 15,000 |
| 15% | € 12,000 – € 16,000 | € 15,000 – € 23,000 |
| 25% | € 16,000 – € 60,000 | € 23,000 – € 60,000 |
| 35% | above € 60,000 | above € 60,000 |
| minimum tax non-domiciled (art. 56(27)) | € 5,000 a year with ≥ € 35,000 of unremitted foreign income | same |
Those who opt for it can fall under The Residence Programme. That is a flat rate of 15% on foreign income received in Malta, with a minimum tax of € 15,000 a year. That minimum tax is payable in full in the year the status is granted and the year it ends. It comes with the following:
- a property requirement: buying for at least € 275,000, or € 220,000 in Gozo or the south of Malta; or renting for at least € 9,600 a year, or € 8,750 in Gozo or the south;
- an application through an authorised registered mandatary;
- a non-refundable fee of € 6,000 (€ 5,500 with purchased property in the south).
Other income is taxed at 35%. € 15,000 is 15% of € 100,000: below a hundred thousand in annual remittances you therefore pay more than 15% in the programme.
The administration that makes it possible
The act taxes foreign income received in Malta, and foreign capital gains not at all. So you have to be able to show what is capital from before your Maltese years of residence and what is income after that. That only works with separate accounts, set up before the move.
What else the Netherlands doesn't let go of
Your AOW accrual, 2% per insured year, stops on the day of departure. Whoever goes to live outside the Netherlands can, according to the SVB, sometimes stay voluntarily insured. The part built up the SVB pays out in Malta in euros. In a SEPA country that happens around the 24th of the month, with at most € 0.48 in bank charges per payment.
An annuity, pension entitlement or substantial shareholding travels with a protective assessment: an assessment the Belastingdienst imposes on emigration but does not collect straight away. Within the EU you get automatic deferral without recovery interest, and after ten years without surrender you ask for remission for pension and annuity. For a substantial interest the assessment stays valid indefinitely.
Remit or not, the programme or not: that is the work of a tax adviser who knows both countries. With this article you know exactly what to ask him.
In Vertrekklaar this is phase 2 of 5 of the journey, step 2.2: the same steps, but for your situation — in your order, tickable, and with the deadlines watched. See the whole journey to Malta or go straight to step 2.2 in the open plan.
What this means for your numbers →
What this rests on
The facts in this article come from these official pages. Rules change. When in doubt, go by the source, not this article.
- Tax treaty Netherlands-Malta (1977) — articles 2(5), 19 and 20 — wetten.overheid.nl
- Income Tax Act (Cap. 123) — article 4 (remittance basis) and 56 (rates, minimum tax of € 5,000) — legislation.mt
- Residence Programme Rules (S.L. 123.160) — 15%, minimum € 15,000, property requirement and fee — legislation.mt
- Belastingdienst — application for the wage tax exemption certificate and the certificate of tax liability in the country of residence — belastingdienst.nl
- SVB — how AOW accrual works (2% a year, voluntary insurance) — svb.nl
- SVB — payment of the AOW outside the Netherlands (SEPA, euros, costs) — svb.nl
- Belastingdienst — protective assessment on emigration — belastingdienst.nl
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